Politics Drive Strong Week for Bitcoin, Ethereum - Cryptoasset Weekly Update (July 20 2024)

Cryptoasset Market News

US politics again took center stage this week after former President Trump narrowly avoided an assassination attempt, named JD Vance as his Vice Presidential candidate, and formally accepted the Republican nomination.

Trump’s odds of winning the election in November spiked last weekend but have since faded slightly, but most models and bettors still see him as the odds-on favorite, a development that supports cryptoasset valuations. In addition to Trump’s own hard pivot in favor of cryptoassets earlier this year, JD Vance has been openly critical of anti-crypto head of the SEC, Gary Gensler, and disclosed that he owns Bitcoin for investment purposes. Needless to say, the potential for easier regulation or even formal state support of the cryptoasset industry would be a favorable development for Bitcoin, Ethereum, and other cryptoassets.

Separately, the SEC appears ready to approve spot Ether ETFs for trading on Tuesday, July 23. As the table below shows, many of these ETFs have the support of large “TradFi” shops like Fidelity and Blackrock and will have near-zero fees for the next 6-12 months; even after the initial fee waivers expire, the fees will be relatively low, a development that should make them relatively attractive to long-term investors:

Source: Bloomberg

Macroeconomic Backdrop

From a macroeconomic data perspective, the US saw a better-than-expected Retail Sales reading for June, and a worse-than-expected uptick in initial jobless claims. Some economists have noted the potential disruption from a hurricane hitting Texas as a one-off distortion to the claims figures, but the Fed will want to see that figure immediately reverse to give it more confidence in the labor market heading into the “dog days of summer.”

As they were last week, markets are still pricing in about a 50/50 chance that the central bank will cut interest rates by 25bps at each of its last three meetings this year, a development that would ease monetary policy and potentially serve as a bullish catalyst for cryptoassets more broadly.

Source: CME FedWatch

Sentiment and Flows

The sentiment gauge we watch most closely, the “Crypto Fear and Greed Index,” spiked last week, hitting a 1-month high near 70 before edging back to 60 heading into this weekend. With last week’s contrarian “extreme fear” reading behind us, this indicator now signals a generally neutral outlook for cryptoassets from a sentiment perspective.

Source: Alternative.me

Meanwhile, Bitcoin ETFs have stacked up 10 straight days of net inflows, according to Farside Investors. This long streak, highlighted by more than $1B in inflows heading into the start of the last week, dwarfs the new supply generated by Bitcoin mining activities and serves as a bullish catalyst for the cryptocurrency as long as it continues.

Source: Farside Investors

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

As the chart above shows, Bitcoin quickly recaptured the key $60K level early last week, extending its gains to the middle of its 4-month range in the mid-$66K range as of writing. While the near-term momentum clearly favors the bulls after a big rally last week, the next leg of this bullish cycle won’t start in earnest until we see a confirmed breakout above the record highs in the $74K zone.

Ethereum Technical Analysis: ETH/USD Daily Chart

Source: StoneX, TradingView

Ether is similarly trading near its lowest level in four months but has rallied off last week’s lows. ETH/USD is currently trading almost exactly on its 200-day MA, with a near-term range established between $2875 support and resistance at $3300. The near-term outlook remains neutral until that range resolves one-way or another.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos and be sure to follow Matt on Twitter: @MWellerFX